Apple Excludes Samsung from New Chip Development Flow – Report

Apple has reportedly excluded Samsung Semiconductor, a chip manufacturing division of Samsung, from development of its future application processors due in the first half of 2014. As it appears Apple wants to make at least one of its future system-on-chips for its iPad and iPhone mobile devices at Taiwan Semiconductor Manufacturing Co.

Samsung Electronics has been Apple’s partner for application processor for iPhone, iPad and Apple TV for around six years now. From 2007 to 2010 the former sold the latter its own specially-designed system-on-chips for smartphones, whereas starting from 2010 the South Korean conglomerate produced Apple-designed highly-integrated SoCs on a contract basis. However, due to intensified competition on the mobile market and multiple lawsuits, Apple is reducing its business relations with Samsung, which is why it now buys various memory chips from companies like Toshiba and is looking forward to make its app processors at different foundries.

“Apple is sharing confidential data for its next A7 system-on-chip (SoC) with the Taiwan Semiconductor Manufacturing Company. TSMC has begun ordering its contractors to supply equipment to produce Apple’s next processors using a finer 20nm level process technology,” said an executive at one of Samsung’s local partners in Korea in an interview with The Korea Times.

Given the fact that Apple plans to introduce new iPhone and iPad models this year, which traditionally included upgrade of application processors and other improvements, it is likely that the A7 chips will still be made by Samsung using 28nm or 32nm process technologies. TSMC, however, will manufacture the generation of Apple’s SoCs that will be available in 2014. It is questionable whether TSMC can satisfy Apple’s demands for SoCs for the iPhone and the iPad, which are sold in quantities that exceed 50 million units in the first quarter or new-generation sales. Moreover, given the long-term contracts between Apple and Samsung, the former unlikely can scrap the orders overnight.

“Apple is cutting the use of Samsung displays for its products. Now the deterioration of ties has expanded to chips. You should remember that the application business is one of Samsung’s new growth engines in which the firm is heavily investing,” another source is reported to have said.

In a bid to offset the lost orders from Apple and keep its semiconductor factories utilized, Samsung will likely try to attract new customers. Keeping in mind that addition of Apple into the list of TSMC’s clients may negatively impact other partners of the Taiwanese company, Samsung should find it relatively easy to gain new clients for its leading-edge nodes.

Officials from Apple, Samsung and TSMC did not comment on the news-story.